Why Recessions Are Good for Business

Published: 11/18/2008 9:11:12 AM

Recessions are usually considered bad things, especially for those who invest in businesses.  Many of those investments will end up accelerating into a crash and burn scenario.  I realize that it must be pretty painful for all concerned.

The reasons why recessions are good for business in the aggregate, especially venture capital-supported businesses, are that they focus more limited resources on companies providing maximum value to customers. Recessions get rid of companies that provide minimal value, leaving those companies with a higher value proposition to thrive.

Also, recessions tend to cull out the less-capable entrepreneurs and managers from the more capable. In times like these, only the strongest entrepreneurs are able to obtain financing and support for their ventures.

Lastly, those companies that are around at the end of the recession, which are presumably the strongest companies, usually create the greatest amount of value for their investors and managers as the general economy pulls out of the recession.

To the victor go the spoils.


Don Jones



Don Jones
CEO, VentureDeal

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